TREVOR CORPORATION Balance Sheet December 31, 2013 Cash $ 30,000 Accounts payabl

Question

TREVOR CORPORATION
Balance Sheet
December 31, 2013
Cash
$ 30,000
Accounts payable
$ 13,750
Inventory
30,750
Interest payable
2,500
Prepaid insurance
5,600
Bonds payable
50,000
Equipment
38,000
Common stock
25,000

$104,350
Retained earnings
13,100



$104,350
During 2014, the following transactions occurred.
  
1.
Trevor paid $2,500 interest on the bonds on January 1, 2014.

2.
Trevor purchased $241,100 of inventory on account.

3.
Trevor sold for $480,000 cash inventory which cost $265,000. Trevor also collected $28,800 sales taxes.

4.
Trevor paid $230,000 on accounts payable.

5.
Trevor paid $2,500 interest on the bonds on July 1, 2014.

6.
The prepaid insurance ($5,600) expired on July 31.

7.
On August 1, Trevor paid $10,200 for insurance coverage from August 1, 2014, through July 31, 2015.

8.
Trevor paid $17,000 sales taxes to the state.

9.
Paid other operating expenses, $91,000.

10.
Redeemed the bonds on December 31, 2014, by paying $48,000 plus $2,500 interest.

11.
Issued $90,000 of 8% bonds on December 31, 2014, at 103. The bonds pay interest every June 30 and December 31.
  
Adjustment data:
1.
Recorded the insurance expired from item 7.

2.
The equipment was acquired on December 31, 2013, and will be depreciated on a straight-line basis over 5 years with a $3,000 salvage value.

3.
The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)
Instructions
(You may want to set up T-accounts to determine ending balances.)
1.    
Prepare journal entries for the transactions listed above and adjusting entries.
2.    
Prepare an adjusted trial balance at December 31, 2014.
Totals
$687,695
I just need closing entries! i have everything else!

Explanation / Answer

Trial Balance Dr Cr Cash 30000 Accounts payable 13750 Inventory 30750 Interest payable 2500 Prepaid Insurance 5600 Bonds payable 50000 Equipment 38000 Common Stock 25000 Retained earnings 13100 104350 104350 1) Interest payable Dr 2500           Cash Cr 2500 2) Inventory Dr 241100          Accounts payable Cr 241100 3) Cash Dr 508800           Sales Cr 480000           Sales Tax payab;e Cr 28800 Cost o goods sold Dr 265000               Inventory Cr 265000 4) Accounts payable Dr 230000            Cash Cr 230000 5) Interest expense Dr 2500                Cash Cr 2500 6) Insurance Dr 5600         prepaud Insurance Cr 5600 7) Prepaid Insurance Dr 10200              Cash Cr 10200 8) Sales tax payable Dr 17000              Cash Cr 17000 9) operating expenses Dr 91000           Cash Cr 91000 10) Bonds payable Dr 48000 Interest payable Dr 2500                  Cash Cr 50500 11) Cash Dr 92700             Bonds payale Cr 90000              premium on bonds Cr 2700 Adjusting entries Insurance expenses        Dr 850            Prepaid insurance Cr 850 (10200/12) Depriciation - equipment Dr 7000          Accumulated dep - equip Cr 7000 (38000 - 3000)/5 Income tax Dr 32415           income tax payable Cr 32415 Income Statement Sales 480000 Less Cost of goods sold 265000 Gross profit 215000 Less operating expenses 91000 Insurance expenses 6450 Interest exoense 2500 Depriciation expenses 7000 106950 Net Income 108050 Tax @ 30% 32415 Net income after tax 75635 Adjusted trial balance                  Unadjusted               Entries               Adjusted       closing entries          closing trial Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr Cash 30000 601500 401200 230300 230300 Accounts payable 13750 230000 241000 24750 24750 Inventory 30750 241000 265000 6750 6750 Interest payable 2500 2500 0 Prepaid Insurance 5600 10200 6450 9350 9350 Bonds payable 50000 48000 90000 92000 92000 Equipment 38000 38000 38000 Common Stock 25000 25000 25000 Retained earnings 13100 13100 75635 88735 Sales 480000 480000 480000 0 Cost of goods sold 265000 265000 265000 0 operating expenses 91000 91000 91000 0 Insurance expenses 6450 6450 6450 0 Depriciation expenses 7000 7000 7000 0 Accumulated depriciation - equip 7000 7000 7000 premium on bonds 2700 2700 2700 Sales tax payable 17000 28800 11800 11800 Interest expense 2500 2500 2500 0 Income tax expense 32415 32415 32415 0 Income tax payable 32415 32415 32415 104350 104350 1554565 1554565 688765 688765 480000 480000 284400 284400 Closing entries Sales Dr 480000            Income summary Cr 480000 Income summary Dr 404365                Cost of goods sold Cr 265000                operating expenses Cr 91000                  Insurance expenses Cr 6450                   Depriciation Cr 7000                 Interest expense Cr 2500                Income tax expense Cr 32415 Income summary Dr 75635              Reatained earnings Cr 75635

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.